State-owned oil marketing companies – Indian Oil Corporation, Bharat Petroleum Corporation and Hindustan Petroleum Corporation – reported a healthy year-on-year growth in consolidated net profits for the quarter ended December owing to healthy marketing margins. The profit after tax (PAT), however, declined sequentially for all the three companies due to inventory losses which impacted gross refining margins.
OMCs are likely to report a healthy YoY growth in their net profits for Q4FY24, say analysts. On a QoQ basis as well, the numbers are likely to rise. They are unlikely to face further inventory loss in Q4FY24.
The three OMCs reported a combined consolidated net profit of Rs 13,119.11 crore for the October-December quarter, compared with a cumulative profit of Rs 3,081.55 crore in the year-ago period.
Analysts at ICICI Securities see strong margins, targeted investments in improving scale and complexity of downstream business, diversification that is aligned to margin improvement, and improving leverage enabling sustained earnings improvement for HPCL over FY24 to FY26E.
In Q3, the OMCs also reported a growth in sales volume, both in the domestic market as well as exports. BPCL reported the strongest sales and export volume which were higher by 4% and 80%, respectively, over the same period last year.
Even as the OMCs recorded profits in Q3, their refining margins declined. IOCL and BPCL also reported a fall in revenue from operations. The decline can be attributed to lower gross refining margins.
The average gross refining margin of IOCL for the April-December period fell to $13.26 per barrel, from $21.08 per barrel a year ago. BPCL and HPCL reported GRMs at $14.72 and $9.84/bbl, compared with $20.08/bbl and $11.40/bbl last year. Refining margins are the difference in value of products produced by a refinery and the value of crude oil used to produce them.
OMCs have said there has been no threat to their oil shipments from the escalating tensions over the Red Sea, and shipments till April are secured. However, the Rea Sea issue has impacted freight rates and it needs to be seen how this unfolds over the next couple of weeks for FY25E impact, HPCL’s top management said.